oversight

Miami-Dade County, Florida, Did Not Properly Administer Its Community Development Block Grant Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-06-19.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                                    Issue Date
                                                                         June 19, 2009
                                                                    Audit Report Number
                                                                          2009-AT-1008




TO:        Maria R. Ortiz, Director of Community Planning and Development, Miami Field
            Office, 4DD


           //signed//
FROM:      James D. McKay, Regional Inspector General for Audit, Atlanta Region, 4AGA

SUBJECT: Miami-Dade County, Florida, Did Not Properly Administer Its Community
          Development Block Grant Program

                                     HIGHLIGHTS

 What We Audited and Why

             We audited the Community Development Block Grant (CDBG) program
             administered by Miami-Dade County, Florida (County). The objective of the
             audit was to determine whether the County administered its CDBG program in
             accordance with applicable U.S. Department of Housing and Urban Development
             (HUD) requirements. We selected the County for review because the Miami
             HUD Office of Community Planning and Development ranked it as high risk in
             its 2007 and 2008 risk assessments. In addition, previous HUD on-site
             monitoring reviews identified concerns with the County’s administration of the
             CDBG program.

 What We Found


             The County did not administer its CDBG program in accordance with applicable
             HUD requirements. It did not comply with HUD requirements in meeting national
             objectives and performance goals and failed to recapture CDBG funds for canceled
             activities that did not meet a national objective. As a result, it had no assurance that
             more than $4.6 million in expended CDBG funds achieved the intended national
             objective or met program requirements.
           The County also did not accurately report CDBG financial and program
           information to HUD in accordance with federal requirements. It failed to report
           CDBG program income for four activities, inaccurately reported program income
           for 2007, and reported inaccurate status and accomplishments of CDBG activities
           to HUD.

What We Recommend


           We recommend that the Director of the Miami Office of Community Planning
           and Development require the County to (1) provide documentation to support that
           CDBG program requirements were followed and national objectives and
           performance goals were met for eight activities or reimburse its program $4
           million from nonfederal funds, (2) recapture $649,143 expended for eight
           activities that had been canceled, (3) ensure that CDBG program income is
           properly reported for four activities, and (4) implement and enforce written
           policies and procedures to ensure effective performance and compliance with
           HUD regulations for meeting CDBG national objectives and performance goals
           and reporting program information and income to HUD.

           For each recommendation without a management decision, please respond and
           provide status reports in accordance with HUD Handbook 2000.06, REV-3.
           Please furnish us copies of any correspondence or directives issued because of the
           audit.

Auditee’s Response


           We discussed the findings with the County during the audit. We provided a copy
           of the draft report to County officials on June 1, 2009, for their comments and
           discussed the report with the officials at the exit conference on June 9, 2009. The
           County provided its written comments to our draft report on June 15, 2009. In its
           response, the County generally agreed with the findings and recommendations.
           The County provided several corrective measures that they are implementing and
           also indicated that it will aggressively pursue the collection of the completion data
           for the eight activities and revise its procedures for the tracking and reporting of
           program income.

           The complete text of the County’s response, along with our evaluation of the
           response, can be found in appendix B of this report. Attachments to the County’s
           comments were not included in the report, but are available for review upon
           request.




                                           2
                           TABLE OF CONTENTS



Background and Objective                                                           4

Results of Audit
      Finding 1: The County Did Not Demonstrate Compliance in Meeting National     5
      Objectives and Performance Goals
      Finding 2: The County Did Not Accurately Report CDBG Financial and          11
      Program Information to HUD

Scope and Methodology                                                             16

Internal Controls                                                                 18

Appendixes
   A. Schedule of Questioned Costs and Funds to Be Put to Better Use              19
   B. Auditee Comments and OIG’s Evaluation                                       20
   C. Activities That Did Not Have Adequate Documentation to Support a National   23
      Objective or Performance Goal
   D. Canceled CDBG Activities                                                    25




                                          3
                     BACKGROUND AND OBJECTIVE

Miami-Dade County, Florida (County), receives annual Community Development Block Grant
(CDBG) program funds from the U.S. Department of Housing and Urban Development (HUD).
HUD awards annual grants to entitlement community recipients to carry out a wide range of
community development activities directed toward revitalizing neighborhoods, economic
development, and providing improved community facilities and services, principally for low-
and moderate-income persons. An activity that receives CDBG funds must meet one of three
national objectives:

          Benefit low- and moderate-income families,
          Aid in the prevention or elimination of slums or blight, or
          Meet community development needs having a particular urgency because existing
          conditions pose a serious and immediate threat to the health or welfare of the
          community and when other financial resources are not available.

The County’s Office of Community and Economic Development administers the CDBG
program.

The HUD Integrated Disbursement and Information System (IDIS) reported that the County
expended more than $42 million in CDBG funds for 2006 and 2007.

We selected the County for review because the Miami HUD Office of Community Planning and
Development ranked it as high risk in its fiscal years 2007 and 2008 risk assessments. In
addition, the 2004 and 2008 Miami HUD monitoring reviews identified concerns regarding the
meeting of national objectives and tracking of program income.

Our audit objective was to determine whether the County administered its CDBG program in
accordance with applicable HUD requirements. Specifically, we determined whether the County
had sufficient documentation to support that the national objective was achieved and whether
program income was properly accounted for.




                                           4
                                 RESULTS OF AUDIT

Finding 1: The County Did Not Demonstrate Compliance in Meeting
           National Objectives and Performance Goals
The County did not demonstrate compliance with HUD requirements in meeting national objectives
and performance goals. It did not maintain adequate supporting documentation to demonstrate that
CDBG activities met national objectives and that performance goals were achieved. It also failed to
recapture CDBG funds for canceled activities that did not meet a national objective. These
conditions occurred because the County lacked effective management controls over its CDBG
activities and disregarded HUD requirements. As a result, it had no assurance that more than $4.6
million in expended CDBG funds achieved the intended national objective or met program
requirements.


We selected 10 activities to determine whether the County maintained sufficient documentation to
demonstrate that they met a national objective. The County did not maintain adequate supporting
documentation to demonstrate that eight activities met a national objective or achieved performance
goals.

 Supporting Documentation
 Inadequate to Meet National
 Objectives
               The County did not maintain adequate supporting documentation for seven activities
               to demonstrate that national objectives would be met. Regulations at 24 CFR [Code
               of Federal Regulations] 570.506(b) state that records must be maintained to
               demonstrate that each activity undertaken meets one of the national objective
               criteria.

                   1. Activity # 332 – The national objective was to improve housing by installing
                      sewer connections to residential units occupied by low- and moderate-
                      income households. The County did not maintain supporting documentation
                      indicating (1) the total number of dwelling units assisted and the number of
                      those units that would be occupied by low- and moderate-income
                      households; (2) the total cost of the activity in CDBG and non-CDBG funds;
                      and (3) for each unit occupied by a low- and moderate-income household,
                      the size and income of the household. As a result, we consider $335,000
                      expended for the activity to be unsupported costs.

                   2. Activity # 1853 – The national objective was to create jobs for low- and
                      moderate-income individuals by providing economic development loans to

                                               5
   businesses. Based on the documentation provided by the County, none of
   the seven businesses demonstrated that it created jobs for low- and
   moderate-income individuals except for one business that provided one of
   six required jobs. As a result, we consider approximately $1.3 million
   expended for the activity to be unsupported costs and $145,772 not drawn
   down to be funds to be put to better use when the County can demonstrate
   that the activity has achieved a national objective.

3. Activity # 1886 – The national objective was to provide early childhood,
   elderly, youth, and mental health services to low- and moderate-income
   individuals in the area. The County was to use CDBG funds to acquire land,
   construct a center, and provide various services to low- and moderate-
   income individuals. The land was acquired in 1999, but construction did not
   begin until February 2006. As of February 2009, the exterior of the center
   had been completed but the center stood vacant and had not begun
   operations.




   County officials informed us that the subrecipient needed to complete the
   inside of the center, furnish the center, and plan and implement programs to
   be administered at the center. As a result, we consider $827,212 expended
   for the activity to be unsupported costs and $5,442 not drawn down to be
   funds to be put to better use when the subrecipient has the necessary funding
   and plans in place to achieve the national objective. The County also
   expended nearly $675,000 in general revenue funds for the project.

4. Activity # 2453 – The national objective was to create or retain jobs for low-
   to moderate-income individuals by providing grants to qualified business
   owners to rehabilitate the exterior of their commercial buildings. The
   County did not maintain sufficient documentation to demonstrate that the
   national objective was met. Specifically, the agreements with nine business

                            6
                  owners did not contain the number of jobs that were to be created or the job
                  titles of the positions. For two businesses, the County provided no
                  documentation supporting that they created jobs. For the remaining seven
                  businesses, the County provided forms certified by the employees, but the
                  forms were not adequate to support that the employees were low and
                  moderate income or that the jobs were permanent. As a result, we consider
                  $712,460 expended for the activity to be unsupported costs.

              5. Activity # 3173 – The national objective was to create jobs for 14 low- and
                 moderate-income individuals by providing a $500,000 grant to a
                 subrecipient to acquire a parcel of land for the commercial development of
                 retail stores. The County did not provide supporting documentation to
                 identify by job title the 14 jobs created and filled. As a result, we consider
                 $500,000 expended for the activity to be unsupported costs.

              6. Activity # 3264 – The national objective was to provide housing to five low-
                 and moderate-income households. The County did not provide
                 documentation supporting that one of the housing units was provided to a
                 low- or moderate-income household. As a result, we consider $27,862 (or
                 one-fifth of $139,308 expended for the activity) to be unsupported costs.

              7. Activity # 4001 – The national objective was to create jobs for nine low- and
                 moderate-income individuals by providing $200,000 to a subrecipient to
                 provide micro loan assistance to businesses in low- and moderate-income
                 areas. The subrecipient provided loans to 36 businesses. The County did
                 not maintain sufficient documentation to demonstrate that the national
                 objective was met. It provided a list of the jobs created by the businesses,
                 but there was no documentation supporting that the person hired was low or
                 moderate income, and one of the businesses creating jobs was not one of the
                 36 that received a loan. As a result, we consider $200,000 expended for the
                 activity to be unsupported costs.


Supporting Documentation
Inadequate to Meet
Performance Goal


           The County did not maintain adequate supporting documentation for one activity
           (# 3561) to demonstrate that it achieved the performance goal agreed to in the
           subrecipient agreement. Regulations at 24 CFR 85.40(a) require grant recipients
           to monitor grant activities to ensure that performance goals are achieved. The
           national objective was to provide home-delivered and congregate meals,
           transportation, and other support services to elderly people. According to the

                                          7
           subrecipient agreement, the County awarded the subrecipient $321,058 in CDBG
           funds to serve meals to 642 elderly people. The County provided documentation
           supporting that the subrecipient expended $320,605 to serve 274 elderly people.
           There was no indication from the documentation provided that the County
           questioned the services or that the subrecipient experienced difficulties in providing
           the meals. As a result, we consider $184,033 (for 368 people not served) expended
           for the activity to be unsupported costs.

           These conditions occurred because the County lacked effective management
           controls over its CDBG activities and disregarded HUD requirements.
           Specifically, the County failed to follow its own policies and procedures to ensure
           effective performance and compliance with federal regulations for meeting
           national objectives. Regarding the six activities for which the County failed to
           provide adequate supporting documentation, County policies and procedures refer
           to the HUD regulations and provide comprehensive guidance to County staff
           regarding national objectives. County officials informed us that inadequate
           internal controls and poor record keeping contributed to the lack of adequate
           supporting documentation. Regarding the activity to complete a center to provide
           various services to low- and moderate-income individuals, County officials
           informed us that the subrecipient was facing financial difficulty and had a change
           in leadership. County officials also acknowledged that they funded the activity
           although it was not feasible and despite the subrecipient’s lack of other funding
           sources and the capacity to begin the activity. For the activity that provided meals
           to 274 elderly people, County officials stated that they failed to modify the
           subrecipient agreement to decrease the number of meals served when the CDBG
           funding was decreased. We reviewed the subrecipient application and agreement
           and found that the agreement was modified to decrease CDBG funding and the
           number of meals served from 1,000 to 642.

           As a result of the conditions noted above, we were unable to confirm whether a
           national objective or performance goal was met for eight CDBG activities that were
           provided more than $4 million. The remaining $151,214 in CDBG funds not drawn
           down for two activities could be used more effectively if the County can
           demonstrate that they achieved a national objective. See appendix C for a
           description of the eight CDBG activities.

CDBG Funds for Canceled
Activities Not Recaptured

           We identified seven CDBG activities in program year 2007 that were canceled by
           the County, but it did not recapture the CDBG funds from the subrecipient. We also
           identified a CDBG activity that the County reported to HUD as having been
           completed that had been canceled. HUD regulations (24 CFR 570.200(a)(2))
           require grant recipients to ensure and maintain evidence that each of their activities

                                            8
                   assisted with CDBG funds meets one of the three national objectives. Since these
                   eight activities were canceled, no national objectives were met. County officials
                   informed us that they reprogrammed the undisbursed CDBG funds for these eight
                   activities but had no plans to recapture the expended funds. The County did not
                   pursue the recapture of expended CDBG funds from nonprofit entities because it
                   believed that these businesses did not have the funds to repay the County. The eight
                   activities that were canceled were administered by nonprofit entities.

                   Since CDBG funds were not used to achieve a national objective, we consider
                   $649,143 expended for the eight activities to be ineligible costs and recommend that
                   the County recapture these funds to reimburse its CDBG program. See appendix D
                   for a description of the eight canceled CDBG activities.

    Conclusion


                   The County did not demonstrate compliance with HUD requirements in meeting
                   national objectives and performance goals for eight CDBG activities. Our review
                   of 10 activities indicated that the County did not maintain adequate
                   documentation to support that national objectives were met for seven activities
                   and performance goals were achieved for one activity. In addition, the County
                   did not recapture expended CDBG funds for eight canceled activities that did not
                   meet a national objective. These conditions occurred because the County lacked
                   effective management controls over its CDBG activities and disregarded HUD
                   requirements. As a result, it had no assurance that eight CDBG activities and
                   eight canceled CDBG activities, totaling more than $4.6 million, achieved the
                   intended national objective or met program requirements. The remaining $151,214
                   in CDBG funds not drawn down for two CDBG activities could be put to better use
                   if the County can demonstrate that a national objective will be achieved.

    Recommendations



                   We recommend that the Director of the Miami Office of Community Planning and
                   Development require the County to

                   1A. Provide documentation supporting that CDBG program requirements were
                       followed and national objectives and performance goals were met for seven
                       CDBG activities according to 24 CFR 570.506 and 85.40 or reimburse its
                       program $3,184,2721 from nonfederal funds.

1
  The County expended $3,252,452 for seven activities. We reduced this amount by $68,180 for one activity because it is
included in recommendation 2C.

                                                            9
1B. Provide HUD with documentation supporting that a national objective has
    been met before requesting the remaining $145,772 from its program.

1C. Develop an action plan to meet the intended national objective of providing
    early childhood, elderly, youth, and mental health services to low- and
    moderate-income individuals. If the action plan is not submitted to HUD
    within 90 days, the County should reimburse its program $827,212 from
    nonfederal funds.

1D. Obtain an approved action plan from HUD before requesting the remaining
    $5,442 from its program.

1E.   Recapture $649,143 in CDBG funds expended for eight activities canceled
      in program year 2007.

1F.   Implement and enforce written policies and procedures to ensure effective
      performance and compliance with federal regulations for meeting CDBG
      national objectives and performance goals.




                              10
Finding 2: The County Did Not Accurately Report CDBG Financial and
           Program Information to HUD
The County did not accurately report CDBG financial and program information to HUD in
accordance with federal requirements. It failed to report CDBG program income for four
activities and inaccurately reported program income for 2007. It also reported inaccurate
program status and accomplishments of CDBG activities. These conditions occurred because the
County lacked effective management controls to ensure compliance with HUD reporting
requirements. As a result, there is a lack of assurance that the County reported accurate CDBG
financial and program information to HUD in accordance with HUD regulations.



 Program Income Not
 Accurately Reported to HUD

              The County did not accurately report CDBG program income to HUD in
              accordance with federal requirements. Regulations at 24 CFR 570.504 require
              that receipts and expenditures of program income be recorded as part of the
              financial transactions of the grant program and be subject to all applicable
              requirements governing the use of CDBG funds. The regulations also require that
              program income be disbursed for eligible activities before additional cash
              withdrawals are made from the U.S. Treasury.

              We reviewed 10 CDBG activities and determined that four activities generated
              program income. The County failed to report CDBG program income for the four
              activities in its financial system and HUD’s Integrated Disbursement and
              Information System (IDIS).

                  1. Activity # 1853 – The County awarded loans to businesses seeking
                     financial assistance for start-up and expansion costs. The loan activity
                     would generate program income by the principal repayment, interest
                     income, and other fees charged to service the loan. The County awarded
                     10 loans but did not provide documentation supporting how much
                     program income was generated on each loan or that it reported in the
                     County’s financial system and IDIS.

                  2. Activity # 2453 – The County provided grants to nine business owners to
                     rehabilitate the exterior of their commercial buildings. Each business
                     owner signed an agreement with the County stating that if the property,
                     which had been rehabilitated with CDBG funds, was sold within five years
                     of receiving assistance, the County could recapture all or a portion of the
                     funds. County property records showed that one of the nine properties


                                            11
       was sold within five years of receiving assistance. Based on the
       agreement, the property owner should have reimbursed the County the
       entire grant amount of $68,180. The County did not provide
       documentation supporting that it knew of the property sale or that the
       CDBG funds were reimbursed and reported in the County’s financial
       system and IDIS as program income. Since the terms of the agreement
       had been breached, we consider $68,180 to be ineligible costs that need to
       be reimbursed to the CDBG program.

   3. Activity # 3173 – The County provided a grant to a subrecipient to
      acquire a parcel of land for the commercial development of retail stores.
      The subrecipient reported $7,490 in program income in its 2004 progress
      reports to the County. Using the information provided by the subrecipient,
      we calculated program income for this activity to be $104,020 as of
      February 2009. The County provided no documentation supporting that it
      verified the accuracy of the amount or that it reported the program income
      in its financial system and IDIS.

   4. Activity # 4001 – The County provided a grant to a subrecipient to
      provide loan assistance to businesses in low- and moderate-income areas.
      The subrecipient issued 36 loans and reported $1,340 in program income
      in its 2005 progress reports to the County. Using the promissory notes for
      the 36 loans, we calculated program income to be $221,535. The County
      provided no documentation supporting that it verified the accuracy of the
      amount or that it reported the program income in the County’s financial
      system and IDIS.

The County also reported $498,546 in program income in IDIS for 2007. We
verified whether the County maintained adequate supporting documentation for
$132,960 in program income reported to HUD. The County failed to report
$2,164 in principal receipts in IDIS, and $32,123 in principal and interest receipts
from January through May 2007 was mistakenly reported twice in IDIS. This
error resulted in a net overstatement of $29,959 in program income reported in
IDIS.

These conditions occurred because the County lacked effective management
controls to ensure compliance with HUD reporting requirements. The County’s
compliance manual informs staff that the earnings, use, reporting, and recording
of program income are subject to HUD requirements and that the earnings and use
of program income should be reported. However, the County did not have
specific written policies and procedures on the receipt and reporting of program
income in its financial system and IDIS. County officials informed us that staff
overseeing CDBG activities lacked adequate expertise to know what program
income was, how to look for it, and how to verify the accuracy of a reported

                               12
             amount. They also said that staff were provided with too many activities to
             manage and that this process needed to be better supervised. In addition, both
             HUD and County auditors had previously reported problems with program
             income.

Program Information Not
Accurately Reported to HUD

             Regulations at 24 CFR 85.40(b)(2) require grantees to submit annual performance
             reports, which will contain brief information on the comparison of the actual
             accomplishments to the objectives established for the period and the reasons for
             slippage if established objectives were not met. The County reported inaccurate
             program status and accomplishments to HUD for 10 CDBG activities.

             The County reported inaccurate program status to HUD for three CDBG
             activities. For two activities (# 1886 and # 2490), the County created two
             identification numbers for each activity. The identification numbers designated
             each activity as both completed and underway, although the activities had not
             been completed. We also identified a CDBG activity (# 3099) that the County
             reported to HUD as having been completed that had been canceled (see finding 1).
             County officials acknowledged that the activity was no longer feasible and should
             have been reported as having been canceled. The inaccurate reporting overstated
             the number of activities the County had completed. The County provided no
             documentation to indicate that it had communicated to HUD the correct number
             of completed and underway activities.

             The County reported inaccurate program accomplishments to HUD for seven
             CDBG activities. For two completed activities (# 332 and # 900), the County
             reported no accomplishments because it failed to obtain direct beneficiary
             information. For five activities, it did not provide supporting documentation for
             the number of jobs created (# 1853, # 2453, # 3173, and # 4001) or the number of
             people assisted (# 3561) that it reported in IDIS. County officials explained that
             the reported accomplishments were based on the quarterly progress reports
             submitted by the subrecipient. The County did not maintain supporting
             documentation because it relied on the subrecipient to do so.


Conclusion


             The County did not accurately report CDBG financial and program information to
             HUD in accordance with federal requirements. It failed to report CDBG program
             income for four activities and inaccurately reported program income for 2007 to

                                           13
                   HUD. The County needs to calculate and report program income for three
                   activities (# 1853, # 3173, and # 4001) and reimburse its CDBG program $68,180
                   for one activity (# 2453) since the terms of the agreement were breached. We
                   provided to HUD our calculation of program income for activities # 3173 and #
                   4001. In addition, the County reported inaccurate program status and
                   accomplishments to HUD for 10 CDBG activities. These conditions occurred
                   because the County lacked effective management controls to ensure compliance
                   with HUD reporting requirements. As a result, there is a lack of assurance that
                   the County reported accurate CDBG financial and program information to HUD
                   in accordance with HUD regulations.

    Recommendations


                   We recommend that the Director of the Miami Office of Community Planning
                   and Development require the County to

                   2A. Provide documentation supporting that CDBG program requirements were
                       followed and program income was reported to HUD for three activities (#
                       1853, # 3173, and # 4001) according to 24 CFR 570.504.

                   2B. Provide HUD with documentation supporting that program income was
                       reported to HUD for two activities (# 3173 and # 4001) before requesting
                       $140,5442 from its program.

                   2C. Reimburse its program $68,180 for activity # 2453 from nonfederal funds
                       and report it as program income in IDIS.

                   2D. Adjust 2007 program income reported in IDIS to reflect $2,164 in principal
                       receipts not reported and $32,123 in principal and interest receipts reported
                       twice.

                   2E. Revise the status of activities # 1886, # 2490, and # 3099 in IDIS.

                   2F.    Provide a list of the activities that are represented by more than one activity
                          number in IDIS and the actual number of completed, underway, and
                          canceled activities.




2
 The $140,544 represents $104,020 for activity # 3173 and $36,524 for activity # 4001. For activity # 3173, we calculated
program income to be $104,020 as of February 2009. For activity # 4001, we calculated program income to be $221,535 for the
36 loans. We subtracted the principal loan amount of $185,011 because it is included in recommendation 1A, resulting in
$36,524.

                                                          14
2G. Provide supporting documentation for the accomplishments of the seven
    activities reported in IDIS for program year 2007 and revise IDIS
    accordingly.

2H. Provide additional training and supervision to staff regarding IDIS reporting
    requirements for CDBG program income and other program information.

2I.   Develop, implement, and enforce more comprehensive written policies and
      procedures regarding the receipt and reporting of program income in the
      County’s financial system and IDIS.




                              15
                         SCOPE AND METHODOLOGY

Our audit objective was to determine whether the County administered its CDBG program in
accordance with applicable HUD requirements. To accomplish our objective, we

       Reviewed relevant HUD regulations and guidebooks;

       Reviewed relevant County policies and procedures, internal audit reports, and
       independent public accountant reports;

       Interviewed HUD and County officials;

       Reviewed HUD files to include IDIS reports and monitoring reports;

       Reviewed County financial records related to CDBG revenue and expenditures; and

       Reviewed the County’s files and records to include the subrecipient contract, monitoring
       reports, and progress reports.

We obtained a list of CDBG-funded activities administered by the County from January 1 to
December 31, 2007. The County reported 340 completed activities, and we selected 10 activities
(representing 18.5 percent of total expenditures) to determine whether the County met a national
objective. We selected activities from each of the four subcategories to benefit low- and moderate-
income individuals (area benefit, limited clientele, housing, and job creation or retention) and
activities with large CDBG expenditures. We determined whether program income was generated
from these 10 activities and if so, whether it was reported to HUD. We also reviewed the 10
activities to determine whether the County reported accurate program status and accomplishments
to HUD. Due to the volume of activities completed, we did not perform a 100 percent review. The
results of the audit apply only to the items reviewed and were not projected to the universe of
activities.

From the list of 2007 CDBG activities, we also identified seven activities, for which the County
had expended CDBG funds, that had been canceled. We also identified one CDBG activity,
which the County reported to HUD as having been completed, that had been canceled. The County
expended $649,143 in CDBG funds for the eight activities.

The County reported to HUD $498,546 in program income for 2007 and provided detailed
spreadsheets on the specific receipts that comprised that amount. Using the spreadsheets, we
randomly selected 59 of 187 receipts totaling $132,960 to determine whether the program
income was accurately reported to HUD.




                                              16
We assessed the reliability of computer-processed data reported in IDIS and in the County’s
financial system for program income and national objectives. For program income, we traced
program income receipts to and from the source documents to assess the reliability of income
reported in IDIS and the County’s financial system. We found deficiencies with the reported
program income because the County lacked adequate controls to ensure that valid and reliable
data were obtained, maintained, and accurately reported in IDIS and the County’s financial
system. Therefore, we considered program income reported in IDIS and the County’s financial
system to be unreliable.

For national objectives, we tested the accuracy of the County drawdowns of CDBG funds
reported in IDIS and the expenditures reported in the County’s financial system. Based on our
tests, we found that the drawdowns were generally supported by the expenditures reported in the
County’s financial system for those activities funded on or after January 1, 1998. We also found
that the expenditures reported in the County’s financial system were supported and accurate and
thus could be relied upon for our audit purposes. Therefore, we used the CDBG expenditures
reported in the County’s financial system for questioned costs, except for activities # 1853 and #
1886/# 3170. For these two activities, we used the drawdown amounts in IDIS as questioned
costs because the County had not drawn down the entire amount of expenditures to reimburse
itself for the expenditures recorded in the County’s financial system.

The audit generally covered the period January 1 through December 31, 2007, and we extended
the period as needed to accomplish our objective. We conducted our fieldwork from October
2008 through March 2009 at the County offices located at 701 NW 1st Court, Miami, Florida.

We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our finding and conclusions based on our audit
objective. We believe that the evidence obtained provides reasonable basis for our findings and
conclusions based on our audit objective.




                                              17
                              INTERNAL CONTROLS

Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following controls are achieved:

         Effectiveness and efficiency of program operations,
         Relevance and reliability of information,
         Compliance with applicable laws and regulations, and
         Safeguarding of assets and resources.

Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. They include the processes and procedures for planning,
organizing, directing, and controlling program operations as well as the systems for measuring,
reporting, and monitoring program performance.


 Relevant Internal Controls
              We determined that the following internal controls were relevant to our audit
              objectives:

                  Controls over program operations;
                  Controls over the reliability of data;
                  Controls over compliance with laws and regulations; and
                  Controls over the safeguarding of resources against waste, loss, and misuse.

              We assessed the relevant controls identified above.

              A significant weakness exists if management controls do not provide reasonable
              assurance that the process for planning, organizing, directing, and controlling
              program operations will meet the organization’s objectives.

 Significant Weaknesses
              Based on our review, we believe that the following items are significant weaknesses.

                  The County did not demonstrate compliance with HUD requirements in meeting
                  national objectives and performance goals (see finding 1).

                  The County did not accurately report CDBG financial and program
                  information to HUD (see finding 2).



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                                   APPENDIXES

Appendix A

              SCHEDULE OF QUESTIONED COSTS
             AND FUNDS TO BE PUT TO BETTER USE

     Recommendation                                                   Funds to be put to
             number          Ineligible 1/     Unsupported 2/              better use 3/
          1A                                      $ 3,184,272
          1B                                                                  $ 145,772
          1C                                          827,212
          1D                                                                      5,442
          1E                    $ 649,143
          2B                                                                    140,544
          2C                       68,180
                                $ 717,323          $ 4,011,484                $ 291,758


1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
     that the auditor believes are not allowable by law; contract; or federal, state, or local
     policies or regulations.

2/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures.

3/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an Office of Inspector General (OIG) recommendation is
     implemented. These amounts include reductions in outlays, deobligation of funds,
     withdrawal of interest, costs not incurred by implementing recommended improvements,
     avoidance of unnecessary expenditures noted in preaward reviews, and any other savings
     that are specifically identified. For recommendations 1B and 1D, the $151,214
     represents funds not drawn down for activities # 1853 and # 3170 that the County could
     effectively use if it demonstrates that a national objective was achieved. For
     recommendation 2B, the $140,544 represents $104,020 for activity # 3173 and $36,524
     for activity # 4001 that the County could effectively use once program income is reported
     in IDIS and before drawing down additional CDBG funds.




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Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1

Comment 1




Comment 2




                         20
Ref to OIG Evaluation   Auditee Comments




Comment 1



Comment 1



Comment 1




Comment 1


Comment 1
Comment 2




                         21
                         OIG Evaluation of Auditee Comments

Comment 1   The County stated that it has begun implementing several corrective measures to
            address our findings and recommendations.

            We believe that the corrective measures when implemented and enforced would
            improve County administration of the CDBG program. However, the County
            needs to ensure that its policies and procedures consist of pertinent federal
            regulations rather than guidelines identified by the HUD website and the County’s
            Office of Strategic Business Management. While we recognize the opening of the
            community center for activity # 1886, we maintain that the County should provide
            documentation supporting that the national objective has been achieved for this
            activity and the other seven CDBG activities cited in our report or reimburse its
            program from nonfederal funds. The County did not comment on the eight
            canceled CDBG activities that did not achieve a national objective.

            We did not include the pictures from the opening ceremony in the report, but will
            provide them for review upon request.

Comment 2   The County stated that it developed one IDIS reference for each activity that had
            multiple IDIS numbers. The County also stated that it will revise procedures for
            the tracking and reporting of program income.

            The County’s response did not adequately address the inaccurate reporting of
            CDBG financial and program information to HUD.




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Appendix C

     ACTIVITIES THAT DID NOT HAVE ADEQUATE
 DOCUMENTATION TO SUPPORT A NATIONAL OBJECTIVE
             OR PERFORMANCE GOAL

                                                        Low/moderate                          Funds to be
      Activity                                                              Unsupported
  #                          Description                  national                               put to
         #                                                                     costs
                                                          objective                            better use
                 Connection of a new sewer
  1     332                                                 Housing         $   335,000
                 collection system
                                                                                          a               a
  2     1853     Revolving loan fund                      Job creation      $ 1,293,097        $ 145,772
                 Acquisition, relocation, renovation,
                 and new construction of center to                                        b            b
  3     1886                                              Area benefit      $   827,212           5,442
                 provide early childhood, elderly,
                 youth, and mental health services
                 Rehabilitation grant through the                                         c
  4     2453                                              Job creation      $   644,280
                 Commercial Revitalization Program
  5     3173     Acquisition of land                      Job creation      $   500,000
                 Development costs associated with
                                                                                          d
  6     3264     the construction/rehabilitation, and       Housing         $    27,862
                 sale of five houses
                                                                                          e
  7     3561     Elderly meals program                  Limited clientele   $ 184,033
  8     4001     Micro loan assistance                    Job creation      $   200,000
        Total                                                               $ 4,011,484        $ 151,214

Notes:
a = According to the County’s financial system, the County expended $1,438,869 in CDBG
    funds for the activity. The unsupported costs of $1,293,097 represent the County drawdown
    from IDIS to reimburse itself for the expenditures, and the $145,772 represents the remaining
    balance that had not been drawn down.

b = The County created two identification numbers for this activity – # 1886 and # 3170. The
    unsupported costs of $827,212 represent the County drawdown of $502,000 for activity #
    1886 and $325,212 for activity # 3170 as of March 24, 2009. The $5,442 represents the
    remaining balance in IDIS for activity # 3170 as of March 24, 2009.

c = According to the County’s financial system, the County expended $712,460 in CDBG funds
    for the activity. The unsupported costs of $644,280 represent a decrease of $68,180 since
    this amount is part of recommendation 2C.

d = The County expended $139,308 to the subrecipient to provide housing to five low- and
    moderate-income households. Since the County did not provide documentation to support

                                                  23
   the income status for one household, the unsupported costs of $27,862 represent one-fifth of
   the expended amount ($139,308 / 5 = $27,862).

e = The executed grant agreement provided the subrecipient $321,058 in CDBG funds to serve
    642 people for a unit cost of $500.09 per person ($321,058 / 642 = $500.09). Supporting
    documentation indicated that 274 people were served and 368 people (642 – 274 = 368) were
    not served. We calculated the unsupported costs of $184,033 by multiplying the unit cost of
    $500.09 per person by the 368 people not served ($500.09 per person x 368 people =
    $184,033).




                                              24
 Appendix D

                     CANCELED CDBG ACTIVITIES


      #   Activity               Description              Funded      Expended
                                                                 a            b
             #                                           amount       amount
      1     804 Acquire additional substandard           $ 120,528    $ 101,572
                   structures
      2    1645 Acquire land for the development           75,000        14,181
                   of five affordable houses
      3    2737 Acquire vacant/built-up parcels for       395,000       145,058
                   low/moderate-income housing
                   and/or commercial use
      4    3037 Predevelopment and administrative          62,500        62,500
                   costs for new construction of 80
                   multifamily units
      5    3099 Project feasibility for establishment     300,000       208,750
                   of wholesale distribution center
      6    3324 Design of street improvements              63,000        62,078
      7    3701 Minor repairs to a center that             94,000        53,144
                   provides at-risk youths academic
                   and artistic education
      8    4180 Provide senior services to Haitians          1,860        1,860
                   and Haitian Americans
                                                        $1,111,888    $ 649,143

Notes:
a = Obtained from the 2006 CDBG Activity Summary Reports from IDIS.

b = Obtained from the County’s financial system.




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